Today, education is very different from what it used to be two decades ago. The curriculum in most schools has undergone significant changes to be in tune with the changing times. Even though schools now have subjects such as environmental studies and personality development, there is a yawning gap when it comes to personal finance. Nobody is teaching anything about money. While schools educate our children about the three 'R's, they don't do much to help them develop basic financial skills.
So what does a caring parent do? Take his child's money management education in his own hands, of course. It might not seem important that pre-teen children understand monetary concepts, but it is absolutely necessary for teenagers to know the basics of finance. For older children, a monthly allowance is a stepping stone to making independent financial decisions. Some people advocate linking the allowance to household chores. I prefer establishing basic chores (making the bed, cleaning their own room, and setting the table) as something each person does because he is a part of a family and it is his job.
Be very careful that the teenager does not become too money-minded and keeps asking, 'How much will I get for looking after grandmother when she is unwell?' However, giving your child 'extra' tasks, like washing your car, for which he or she can earn money can help him learn about the satisfaction that comes from working for a goal. Your child will also understand that the more he works, the more money he earns — a valuable lesson for life.
Open a savings bank account in your child's name to help him understand banking procedures. Take him along when you visit your bank locker. Let him operate the ATM under your supervision. All these are learning experiences that will add to his knowledge of finance.
Last, but not least, be mindful of how you talk about money in the presence of a child. Do you complain about bills or fret about money? Remember, your child looks up to you as a role model. Getting yourself on the right financial track is the best lesson of all.
P.V. Subramanyam is a financial trainer at Iris
